Reader's Digest parent seeks bankruptcy protection

The parent company of Reader's Digest has filed for Chapter 11 bankruptcy protection for the second time in less than four years, saying it needs to cut its debt so it can keep restructuring.

RDA Holding Co. says it will keep publishing the magazine during the bankruptcy, and aims to be out of Chapter 11 within six months.

The circulation of Reader's Digest has declined because of competition from the Internet - shrinking by nearly two-thirds since 1995 - but it is still one of the world's most-read magazines.

The New York company said late on Sunday that it plans to cut its debt load by 80% during the restructuring, leaving it with about $100 million in debt. It said it has already reached agreements with its secured lender and more than 70% of its secured noteholders. A group of its creditors have supplied $45 million in new financing to help Reader's Digest go through the process as part of a $105 million loan to repay existing bank debt.

As revenue declines, Reader's Digest has been selling off some of its assets. Its food website Allrecipes.com went for $175 million last year, and it sold its Every Day with Rachael Ray cooking magazine in late 2011. Meredith Corp., publisher of the Better Homes and Gardens magazine, bought both.

Reader's Digest paid circulation fell 0.6% to 5.5 million at the end of last year, according to the Alliance for Audited Media. That was about where it stood after cutting its guaranteed circulation in 2009. But in 1995, Reader's Digest had circulation of more than 15 million.

The circulation-tracking company said Reader's Digest is the fifth-biggest US consumer magazine by circulation, behind two AARP publications, Game Informer Magazine, and Better Homes and Gardens.

RDA's Reader's Digest Association Inc. filed for Chapter 11 protection in 2009 in the midst of a recession and the drop in advertising and circulation. The company emerged from bankruptcy in early 2010 with less debt, but has still struggled.

Robert E Guth, RDA's president and CEO, said a "complex transformation" begun 18 months ago under new senior managers "has resulted in a more streamlined, more focused, and more profitable business, but we have unfortunately been unable to align our debt levels correspondingly."

Besides Reader's Digest, the company publishes a food publication, Taste of Home, and has 21 brands globally.

The bankruptcy filing in the Southern District of New York covers the company's US businesses. It said its international operations are not part of the filing. It said it is still looking for agreements to sell and license its international businesses, and expects to finalize some deals in coming weeks.